Extensive News Reports of the Risks of Vioxx Placed Investors on Inquiry Notice More than Two Years before Filing of Securities Fraud Class Actions, Thus Warranting Dismissal of Class Action Complaint as Time-Barred as Requested by Defense Federal Court Holds
This securities fraud class action is but one of thousands of class action and individual complaints filed against Merck arising out of its prescription drug Vioxx. This class action alleged that Merck withheld information that Vioxx increased a patient’s risk of heart attack and misrepresented the drug’s safety. In re Merck & Co., Inc., Securities, Derivative & “ERISA” Litig., ___ F.Supp.2d ___ (D. N.J. April 12, 2007) [Slip Opn., at 2]. Defense attorneys moved to dismiss the class action complaint on several grounds, mostly notably that the claims were time-barred, id., at 1-2; the district court agreed with the statute of limitations defense and dismissed the class action complaint with prejudice as untimely.
By way of background, Merck brought Vioxx – a nonsterodial anti-inflammatory drug (NSAID) – to the market in May 1999,and two years later the Food & Drug Administration approved Vioxx for various uses. Slip Opn, at 2-3. “Merck continued to research, study and test Vioxx after its approval by the FDA and introduction to the market.” Id., at 3. In March 2000, Merck disclosed that one of those studies revealed that an increased incidence of heart attack and other thrombotic events. Id. Merck’s press release attributed this finding to the properties of the control drug but, according to the class action complaint allegations, Merck knew that the real cause of this difference was that Vioxx increased the risk of heart attacks. Id., at 4. The FDA advisory committee found inclusive evidence of the cause of the increased risk of cardiac events but believed it prudent to “include on the Vioxx label data about the higher incidence of cardiovascular events,” id. The study received extensive news coverage as early as April 2000, and several news articles warned patients that Vioxx “might increase their risk of suffering a heart attack.” Id., at 5. Other news reports agreed with Merck’s conclusion that the control drug used in the study worked to prevent heart attacks, thus accounting for the difference in incidence of cardiac events with the Vioxx control group, id., at 6-7. For its part, Merck issued numerous press releases touting the safety of Vioxx, id., at 7-8. The FDA criticized Merck’s promotional efforts, and in a warning letter dated September 17, 2001 and published on the FDA website, the FDA “admonished Merck for misrepresenting the safety profile of Vioxx, downplaying the cardiovascular findings of the . . . study,” id., at 8.
The first product liability class action against Merck concerning Vioxx was filed on May 29, 2001; dozens of additional class action and individual complaints were filed after the FDA issued its Warning Letter in September 2001. Slip Opn., at 11-12. Merck withdrew Vioxx from the market on September 30, 2004., id., at 13. The first securities fraud class action against Merck concerning Vioxx was filed on November 6, 2003, id., at 14; again, dozens of additional securities fraud class action claims followed, and the Judicial Panel on Multidistrict Litigation centralized the securities class action lawsuits in the District of New Jersey, id.
In connection with the defense motions to dismiss the class action complaint, the parties agreed that the applicable statutes of limitation for the Sections 10(b), 20(a) and 20A claims under the Securities Exchange Act of 1934 and Rule 10b-5 were “the earlier of two years after discovery of the facts constituting the violation or five years after the violation” pursuant to Sarbanes-Oxley. Slip Opn., at 16. With respect to plaintiffs’ alleged violations of Sections 11, 12(a)(2) and 15 of the Securities Act of 1933, the district court held that a one-year statute of limitations period applied, id., at 16-17. Based on its detailed factual analysis, see id., at 17-25, the federal court held that plaintiffs were on notice before November 6, 2001 “that the FDA had accused Merck of misrepresenting the safety profile of Vioxx by promoting a theory that had not been demonstrated by substantial evidence.” Id., at 25. The court rejected plaintiffs’ efforts to downplay the significance of the FDA’s Warning Letter, id., at 25-29, and concluded that “the abundant public information leading up to and immediately following the FDA Warning Letter – in addition to the Warning Letter itself – would give an investor in Merck reason for concern and charge him or her with the responsibility of conducting a diligent investigation,” id., at 29.
Accordingly, the district court dismissed the class action complaint with prejudice, finding the class actions time-barred by the applicable one- and two-year statutes of limitation. Slip Opn., at 31.